Blackstone's $69 billion REIT restricts redemptions, hurting the real estate industry

Following a spike in redemption requests, Blackstone Inc. on Thursday restricted withdrawals from its $69 billion unlisted real estate income trust (REIT), dealing a brand that helped it grow into an asset management powerhouse an unparalleled blow.

In contrast to Blackstone setting the limitations on the day, the redemption curbs arrived because they exceeded previously established limits. However, they increased investor apprehensions regarding the REIT's future, which accounts for around 17% of Blackstone's profits. On the news, Blackstone's stock ended the day down 7.1%.

According to a person close to the fund, investors in the REIT are worried that Blackstone is taking too long to raise the vehicle's valuation to that of publicly traded REITs that have suffered due to higher interest rates. Because they make financing properties more expensive, rising interest rates have a negative impact on real estate values.

In contrast to the publicly traded Dow Jones U.S. Select REIT Total Return Index's (22.19%) decrease during the same period, Blackstone's REIT has posted a year-to-date return of 9.3%, net of expenses.

Some investors are wondering how Blackstone determines the REIT's valuation in light of this outperformance, according to Alex Snyder, a portfolio manager at Center Square Investment Management LLC in Philadelphia.